Next Up for DOL Fiduciary Redraft: Hearings

"There will still be more questions if there's a final rule," added Aliya Wong, executive director of the Chamber's retirement policy.

A Call for Harmonization

FINRA called DOL's approach "fractured" and said that the plan will "confuse retirement investors, financial institutions and advisors." Moreover, FINRA said the plan would apply a "panoply of regulatory regimes" to different accounts served by the same advisor for a single client.

The self-regulator for broker-dealers stated that the confusion created by DOL's fiduciary redraft could be easily ameliorated if "a harmonized best interest standard applied to all accounts, retirement and non-retirement, investment and advisory and broker-dealer. The customer and financial advisor could then properly consider the investment portfolio as a whole, subject to a single, harmonized standard," FINRA said in its 21-page comment letter.

FINRA also stated that the federal securities laws should "serve as the foundation of the best interest standard that will apply to broker-dealers," adding that DOL's redraft does not meet "some of the minimum criteria for such a standard."

Imposing a best interest standard "requires rulemaking beyond what is presently in place for broker-dealers," FINRA explained in its letter, noting that it "stands ready" to work with the department and the SEC to develop "this additional rulemaking."

Some changes will be granted, Timothy Hauser, deputy assistant secretary for DOL's Employee Benefits Security Administration, said during a meeting of the SEC's Investor Advisory Committee in late July. While DOL is "committed to doing something to fix" the retirement advice problem, he said the department isn't "wedded to any particular choice of words or regulatory text."

Hauser added: "The point is to improve this market. We've gotten a lot of helpful comments along the way. There will be changes [to the redraft], no doubt about it."

Jerome Lombard, president of Janney Private Client Group, argued during the Investor Advisory Committee meeting at SEC headquarters in Washington that DOL's rule is "confusing, burdensome," would likely eliminate investment advice for lower-income savers and result in "endless litigation."

Lombard, like other critics, took issue with the redraft's best interest contract exemption, or BICE, which he said Janney has "no intention of utilizing" as currently laid out.

BICE, Lombard argued, would not only "impose new legal liabilities for firms that utilize it," but it's impossible to discern what's "permissible and not" as the exemption is currently written. Janney, he continued, would also have to "revise our advisor compensation model" under BICE.

Labor Secretary Thomas Perez stated at a Brookings Institution event held in late June that the comments DOL is receiving on the redraft are helping to "sharpen" its thinking on how to make changes to the plan's prohibited transaction exemptions, like the point of sale disclosure requirements under BICE.